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WASHINGTON (Reuters) - Elizabeth Warren, Bernie Sanders and four other U.S. senators are pressuring the U.S. Treasury Department to step up oversight and offer more guidance to financial institutions on addressing climate change risks threatening the U.S. financial system.
In a letter sent to the Treasury last week, Democratic senators Warren, Martin Heinrich, Edward Markey, Sheldon Whitehouse and Jeffrey Merkley, as well as Sanders, an independent, welcomed the department’s work on the issue so far but called for “added urgency” given increasing risks.
The Treasury should act now - including through its role as head of the multi-regulator Financial Stability Oversight Council - to address systemic risks becoming evident in a crash in coastal property values, insurance market failures, and uninsurable wildfire risks, they said.
“As climate financial impacts grow, the Climate Hub and Treasury must pursue with added urgency all available measures to address the climate crisis and its threat to the stability of our financial system,” the senators wrote in the previously undisclosed letter, a copy of which was obtained by Reuters.
The Treasury had no immediate comment on the letter dated Sept. 20.
The senators called on Treasury Secretary Janet Yellen and newly appointed climate counselor Ethan Zindler, a climate and clean energy research executive, to do more to protect the U.S. economy from what Yellen has described as the “existential threat” posed by climate change.
Recent climate disasters and financial disruptions have underscored the rising cost and impact of climate change, with one study showing that only 40% of direct weather-related costs suffered worldwide in 2022 were covered by insurance providers.
The senators said they were particularly concerned about nonbank financial institutions, which also played a critical role in the 2008 global financial crisis, and said the FSOC should finalize and immediately implement a new analytic risk framework for climate-related financial risks.
The Treasury should also develop better climate risk scenario exercises for banks, and ensure that all FSOC members can access data gathered by Treasury’s Climate Data and Analytics Hub under a pilot project launched in July 2022, they wrote.
The senators welcomed the Treasury’s new voluntary principles for “net-zero” financing commitments, but said there were gaps in the guidance and that the department should make clear that all large financial institutions should have a credible transition plan.
They also repeated earlier calls for stronger Internal Revenue Service enforcement of rules on political activity by nonprofit organizations, citing efforts by special interests to fuel climate change denial, and investigations into how such funding could be obstructing more action on the climate crisis.
Reporting by Andrea Shalal, editing by Deepa Babington
